Essar Steel Lenders Tell Supreme Court That NCLAT Order Misinterpreted Insolvency And Bankruptcy Code Provisions

Essar Steel’s lenders have informed the Supreme Court that the National Company Law Appellate Tribunal (NCLAT) has misinterpreted Insolvency and Bankruptcy Code (IBC) norms thoroughly.

The company’s Committee of Creditors (CoC) has filed an appeal against the NCLAT order, stating that it suffers from jurisdictional and factual errors, as well as endangered the economic interests of the country.

Implementation of the NCLAT judgment would have serious repercussions for Indian jurisdiction in the international market and gravely discourage foreign investment in India, the lenders’ appeal stated.

It may be recalled that on n July 4, the NCLAT had approved the Rs 42,000-crore bid placed by ArcelorMittal to take over Essar Steel.

However, the NCLAT order placed the secured creditors as well as operational creditors on the same pedestal for distribution of the recovered money, which led to banks suffering a higher haircut.

Payment terms of the approved resolution plan were altered by the NCLAT without the consent of the CoC or the resolution applicant ArcelorMittal, the lenders’ appeal petition stated.

The NCLAT order also took away the CoC’s authority to approve or reject a resolution plan, the appeal stated.

The NCLAT had failed to appreciate that the IBC is based on equitable treatment of different classes of creditors, and not all creditors can be treated equally irrespective of their nature of claim, it said.

The interpretation adopted by the NCLAT judgment will have a disastrous impact on the banking industry and expose banks and financial institutions to grave financial distress, the lenders’ appeal stated.
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